How to Get the iPhone 5 if You're Already Under Contract

The penalty for trading in your existing smartphone for an Apple iPhone 5 if you're still under contract may not be as draconian as you fear it is.

NEW YORK ( TheStreet) -- The iPhone 5 is finally here, and we don't blame you if you want to run out and get it. This, after all, is the iPhone we thought we were getting last fall, when Apple instead gave us the iPhone 4S, a juiced-up version of the iPhone 4 with the same form factor. This time around the new iPhone has caught up to its Android competitors in a number of ways, including a bigger screen and support for 4G LTE networks for the first time.

If you're up for a new contract -- that is, you've completed your previous two-year mobile contract and are ready to re-up with your current provider or switch to a new one -- then you're golden. Assuming you liked what you saw in this afternoon's announcement, then you can grab the new baseline (16 GB) model of the new iPhone for $199, the same price point the phones have always had on release (as always, you can pay more for increased storage -- $299 for 32 GB or $399 for 64 GB of space).

But if you're currently under contract -- let's say you bought the iPhone 4S last fall, like I did -- then you're in a tricky position. To get the phone at that $199 price point, you'll need a new two-year contract, and that means breaking your current contract. And that means paying an early termination fee.

That's not as bad as it sounds.

At Verizon , the early termination fee for a two-year contract resulting from the purchase of an "advanced device" (read: smartphone) is $350 minus $10 for each month you've had it. But if your contract is already a year old, you're in better shape -- you're paying around $230 to get out of your contract and into a new one.

The other major carriers have similar ETF structures. At AT&T, the fee is $325 minus $10 for every month completed, so a year-old contract costs a little over $200 to escape. At Sprint , a contract with a year remaining costs $240 to escape.

Of course, that still leaves you around $200 in the hole just for the privilege of upgrading to the newest iPhone early. That's where the second part of the equation comes in: Selling your old phone. Now, you might have plans for the old device -- perhaps as a hand-me down to a family member, or repurposing it as an iPod Touch. But assuming you have no such plans for your old phone, you can get enough money selling it to cover the ETF, and then some.

At Gazelle , which buys your old electronics, a 16GB iPhone 4S in good condition will get you $240. Meanwhile, eBay Instant Sale will give you around $275 for the same device. And Apple will also "recycle" your old phone; if it's in perfect condition, a 16GB iPhone 4S will get you $285.

Of course, if you're on eBay anyway, you could also try your hand just selling it to another user, which could make you a bit more money; right now, used iPhones are selling for upwards of $300 . And you could also try selling it on another online marketplace like Craigslist.

Also, keep in mind that if you ignored our earlier advice and just bought the iPhone 4S last month , then here's the deal on post-purchase remorse returns:

At AT&T, it's 30 days after activation ; at Verizon, there is a standard 14 day return policy, but return policies may vary depending on whether the phone was bought at a Verizon store or another retailer; in fact, this is a return issue that could vary from carrier to carrier and retailer to retailer, so customers need to inquire further with customer service at the point of sales. If you buy from the Apple Store, it's 30 days for the iPhone.

Whatever you wind up doing, it's clear that you shouldn't be kicking yourself if you bought the iPhone 4S and now wish you'd waited for the iPhone 5. By selling your old phone, you can net enough cash to cover the early termination fee and put a good dent in the cost of your new phone.